- Business confidence stabilising
- Profit expectations stronger for Q4
- Investment, hiring off agenda
- More promising after election

By Greg Peel

History suggests that aside from perhaps some initial volatility, there is little correlation between stock market performance and which political party is in government. Stock market performance reflects business performance, so for Australian businesses the primary issue is not one of who wins the election, but that uncertainty is removed once a government is formed.

Business confidence, and the year-end outlook for profits, sales, employment and capital investment, have been declining over most of 2013 according to the Dunn & Bradstreet's National Business Expectations surveys, but the latest survey suggests confidence may be stabilising as businesses look ahead to the December quarter ? a time when the election will be decided and the benefits of RBA rate cuts and the lower Australian dollar will be flowing through to business performance.

The latest survey suggests 24% of businesses are anticipating increased earnings in the fourth quarter, with the profit index measure edging up to plus 14.9 from plus 13.2 in the previous survey. Profit expectations for the manufacturing sector in particular have turned around on the Aussie's fall to under US90c, with that sector's profit index jumping to plus 19.9 from plus 1.5.

Profit expectations may be improving but businesses remain reluctant to spend, and cost controls mean hiring new workers is not on the agenda for now. The employment index measure in the survey has stopped falling, but remains in negative territory at minus 1.3, up from minus 3.3. A negative number indicates businesses are more likely to fire than hire on a net basis.